If you sold your 1031 relinquished property in your own individual name, can you buy the replacement property through an LLC? Perhaps you want the LLC for liability, privacy, or maybe your lender is requiring it.
The answer is yes, you can buy in an LLC. However, that LLC cannot change the continuity of investment in that the same taxpayer that sold the relinquished property has to be the same taxpayer that acquires the replacement property. So if you own 100% of the LLC and the LLC is properly set up as a disregarded entity, it would be transparent for tax purposes. That’s a great way to acquire your replacement property in an LLC and not mess up your 1031 exchange.
Replacement property may be received by a taxpayer via a single member LLC that is disregarded as an entity separate from its owner (unless it elects to be taxed as an association). Reg Section 301.7701-2 and 3. The sole owner of an LLC which is disregarded for tax purposes is in the same position economically as if he/she had taken title in his/her own individual name. See Ltr. Ruls. 9751012 and 9807013. See also Schinner, "IRS Rulings Expand Opportunities for Using Single-Member LLCs in 1031 Exchanges," 88 JTAX 286 (May1998).
When an LLC is disregarded for tax purposes, the sole owner is in a similar economic position as if they had owned the property in their own individual name. This information is supported by Letter Ruling 9751012.
Defer Capital Gains Tax with a 1031 Exchange
Defer your capital gains taxes with a 1031 exchange and keep your money working for you in a continued investment! Like-kind exchanges are available for any US taxpayer to use. However, you need to be sure you’re meeting the 1031 exchange guidelines in order to defer your capital gains tax burden. The best way to do that is to work closely with a trusted qualified intermediary on your exchange. The intermediaries at CPEC1031, LLC have been facilitating exchanges for over twenty years. We can help you navigate the 1031 exchange process and defer your capital gains taxes.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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